Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- El Pollo Loco Holdings Inc (LOCO, Financial) reported a 2.7% increase in system-wide comparable sales for the third quarter of 2024.
- The company expanded restaurant-level margins by 230 basis points year-over-year to 16.7%.
- El Pollo Loco Holdings Inc (LOCO) is making progress in reducing the cost of its prototype to stimulate future restaurant development.
- The company is on track to complete its kiosk rollout by early Q1 of next year, enhancing customer experience with new technology.
- El Pollo Loco Holdings Inc (LOCO) raised its margin expectations for 2024 for the third consecutive quarter, indicating strong financial performance.
Negative Points
- Company-operated restaurant revenue decreased by 1.5% compared to the same period last year.
- There was a 7.6% decrease in transactions during the third quarter, indicating a decline in customer visits.
- The macroeconomic environment continues to put pressure on consumers, affecting sales.
- California, a major market for El Pollo Loco Holdings Inc (LOCO), is experiencing significant transaction declines.
- The company faces increased competition from QSR competitors offering low-price promotions, impacting demand.
Q & A Highlights
Q: What factors contributed to the sequential drop in same-store sales quarter-to-date compared to Q3?
A: Liz Williams, CEO, explained that the value-oriented consumer is demanding more value, prompting the company to identify ways to address this need. The company had limited innovation in its 2024 calendar, relying on re-hits of previous offerings. To address this, El Pollo Loco is introducing a $5 Pollo Bowl and a two-for-$5 taco promotion to drive transactions and provide more value to consumers.
Q: How does the price mix or average check change from Q3 to Q4?
A: Ira Fils, CFO, stated that the price mix will soften slightly, with pricing expected to be a little under 7% as they move into Q4.
Q: How high can restaurant-level margins go without generating positive traffic?
A: Ira Fils, CFO, mentioned that despite the importance of sales, there are numerous cost initiatives underway that could continue to improve margins next year, especially on the procurement side. Liz Williams, CEO, emphasized that they are willing to invest in traffic-driving initiatives, such as the $5 Pollo Bowl and catering partnerships, even if it means sacrificing some margin.
Q: Are there any regional differences in the macro environment affecting sales?
A: Liz Williams, CEO, noted that California has experienced some of the biggest transaction declines, while markets like Texas have shown healthier transaction growth. However, the consumer is under pressure across all markets, with Las Vegas also experiencing challenges.
Q: What impact do competitor promotions have on El Pollo Loco's demand?
A: Liz Williams, CEO, believes it's less about innovation and more about the value offered at low price points by competitors. El Pollo Loco has not competed as much in the $5 price point range but plans to address this with new promotions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
